Equally Hungry

From Thomas Sowell’s column, “Forward” to the Past?:

The seductive notion of economic equality has appealed to many people. The pilgrims started out with the idea of equal sharing. The colony of Georgia began with very similar ideas. In the midwest, Britain’s Robert Owen– who coined the term “socialism”– set up colonies based on communal living and economic equality.

What these idealistic experiments all had in common was that they failed.

They learned the hard way that people would not do as much for the common good as they would do for their own good. The pilgrims nearly starved learning that lesson. But they learned it. Land that had been common property was turned into private property, which produced a lot more food.

Similar experiments were tried on a larger scale in other countries around the world. In the biggest of these experiments– the Soviet Union under Stalin and Communist China under Mao– people literally starved to death by the millions.

It is no coincidence that those who are going ballistic over the economic inequality between the top one or two percent and the rest of us are promoting a far more dangerous concentration of political power in Washington– where far less than one percent of the population increasingly tell 300 million Americans what they can and cannot do, on everything from their light bulbs and toilets to their medical care.

This movement in the direction of central planning, under the name of “forward,” is in fact going back to a system that has failed in countries around the world– under both democratic and dictatorial governments and among peoples of virtually every race, color, creed, and nationality.

 

Parallel

Government action -> Unintended consequence -> More government action

In this 2010 EconTalk podcast, I learned that Stalin set a ceiling on the price of agricultural products. He thought this would generate a surplus of agricultural products. But, his price was so low that farmers could not cover their cost of production, so they stopped selling their produce.

Then, Stalin sent the militia to take the grain by force.

I find this to be a striking parallel to the individual health insurance mandate.

First, government (federal and states) contribute to making the price of health insurance high over several decades through employer tax preferences, state mandates, guaranteed emergency room care, pre-existing condition requirements and so forth.

That is similar to Stalin’s price control, but it’s a supply control. That is, rather than setting a maximum price, government is setting supply requirements.

Both of the government interventions distort incentives.┬áStalin’s price ceiling reduces incentives for farmers to sell their produce. The government health insurance supply requirements reduce incentives for people to buy insurance by increasing the price of it and making it easier to get medical treatment without insurance.

Next, people predictably respond to those distorted incentives. The farmers in Russia sell less produce. People in the U.S. purchase less health insurance.

Finally, government uses more force to try to fix the problem they caused. Stalin, rather than address the source of the problem by eliminating his price control, sends the army to force farmers to give up their produce. In the U.S., rather than eliminating the source of the problem driven by the supply requirements that cause fewer people to buy insurance, government plans to force people to buy an approved plan or face a penalty.

This is how government grows. It does something to solve some problem, but causes more problems. Few people recognize that government caused those new problems and looks to government to solve them. So government does more things to solve those problems, causing even more problems.